GIG Economic Bulletin – February 22, 2021

A new tourism campaign, combined with enhanced health and movement protocols are part of the planning to ensure Greece hits the ground running as soon as travel resumes, while the government looks to €4 billion of recovery funds to kick off its investment programmes.

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Tourism Minister Harry Theoharis revealed a new tourism strategy, leveraging enhanced health protocols, in a bid to enable the speedy reopening of the sector. A package of measures is being rolled out to lure private family wealth managers to the country, while the government is eyeing €4 billion from the first round of the EU Recovery and Resilience Facility to kickstart investments.

Macro

Greece’s Consumer Price Index fell by 2.4% Y-o-Y in January according to the Hellenic Statistical Authority (ELSTAT), marking 10 consecutive months of negative readings. Transport, clothing, footwear, and housing prices led the fall, while none of the major categories increased. Greece’s continuing deflationary trend puts it increasingly at odds with the rest of the eurozone, where the CPI rebounded by 0.9% in January.

Industrial turnover fell by -3.5% Y-o-Y in December, recording a total reduction of -12.1% over 2020. January gave the only positive reading in 2020, with a 6% increase, prior to the first effects of the pandemic on demand.

Greek businesses lost €45 billion in sales in the 12 months since March 2020, with the losses cut across most business activities, not just the sectors forced to close due to lockdowns. According to ELSTAT, sales in 2020 were just €266 billion, down -13.5% from the previous year.

RRF

The first five projects funded by the EU Recovery & Resilience Facility (RRF) will include funding computers for students, energy upgrades of buildings, professional training worth €300 million, and a programme connecting cash registers to the tax authority. Greece is aiming for an estimated €4 billion from the first round of RRF funding.

Tourism

The government is making plans to enable a speedy opening of tourism once the conditions allow it. According to the proposal presented by Greek Tourism Minister Harry Theoharis, the strategy relies on a brand new promotional campaign, enhanced health protocols for tourism businesses, and restrictions on movement. However, Prime Minister Kyriakos Mitsotakis’ proposal for vaccination certificates is still meeting resistance in Brussels, where the European Commission has voiced concerns over discrimination.

This year’s tourism campaign will focus on four points: gastronomy, luxury wellness tourism, outdoor & adventure tourism, and maritime (targeting yachts). Copyright: Aerial-Motion / Shutterstock.com

Finance

Greece is launching a package of measures to attract family offices – the investment bureaus of the ultra-rich – to set up shop in the country. Private wealth managers employing at least five people and generating a minimum annual expenditure of €1 million will be able to deduct staff costs and operating costs from their taxes, with the effective tax rate amounting to 1.68%. The plan dovetails with incentives to attract high net worth non-doms to move their tax residence to Greece.

Energy

Eleven potential bidders emerged in the first stage of the tender for a 49% stake in the national power distribution network HEDNO (DEDDIE). The interested parties, who have not yet been officially named, include strategic investors, network infrastructure managers, and asset managers, according to owner PPC.

Upgrades, digitisation, and interconnection of energy networks are expected to attract investments of €3.5 billion over the next decade according to estimates by the Energy Ministry. Natural gas as a bridge to clean energy, smart networks, electricity interconnections to the islands ,and cross-border interconnections are the four pillars of the national energy infrastructure strategy.

The task of undergrounding Greece’s powerlines gained urgency after storm “Medea” caused widespread power outages in Athens and areas across the country at the start of the week. Prime Minister Mitsotakis committed to funding the project through the RRF, which already has €1 billion earmarked for climate change actions.

Covid-19 Measures

Support measures for businesses impacted by the pandemic have been extended into June, raising the amount earmarked from €7.5 billion in the 2021 budget to around €11-€12 billion. The overall cost of the pandemic including lost state revenues is expected to more than double the primary deficit from €6.6 billion to €14 billion.

The Finance Ministry estimates that each month of total lockdown costs the public finances €2.5-€3 billion depending on seasonal activities, while retail closures alone add the equivalent of 0.7% of GDP – monthly – to the primary deficit.

Stock Market

The ASE general index edged up by 0.68% in the past week to close at 781.42 points in a week marked by low trading volumes. Analysts expect the sideways movements to continue in light of the continuing uncertainty over the course of the pandemic and rumours of an extension to the current lockdown.

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